Having more farmers covered by insurance will reduce reliance on public funding, farming groups say.

ABC Rural: Danielle Grindlay

Comprehensive car insurance, life insurance and income protection products are all designed for when the worst strikes, but few farmers are covered for when the rain dries up.

That is why farming groups, including the National Farmers Federation and Grain Growers, will use tomorrow's Drought Summit in Canberra to call for tax incentives to entice more farmers to take out multi-peril crop insurance (MPCI).

The Federal Government has already committed $1.8 billion to support farmers and regional communities through the current drought, and farming organisations say wider insurance coverage could reduce pressure on the public purse the next time disaster strikes.

The cost of policies may be putting off some farmers from taking out insurance.

The cost of policies may be putting off some farmers from taking out insurance.

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In Narrabri, 530 kilometres north of Sydney, the drought meant all of grain grower Ian Gourley's crops failed.

His first MPCI policy has allowed him to "forget about this season".

"All my costs have been covered," he said.

"I'm certainly worse off because I haven't had any production, and my normal income hasn't been coming in, but I'm not worse off than where I started the year at."

Insurance provider Latevo was the first company to offer MPCI products to farmers, starting in 2014.

"It's designed to protect the amount of money the farmer has spent putting their crop in the ground," CEO Andrew Trotter said.

"A little bit like your car, where the insurance policy is matched to its market value, our insurance program does the same thing — we match it to what the farmer has spent so if they lose their crop, they get their money back."

WA Farmers Federation president Tony York has been using the products at his property in Tammin in Western Australia's central wheatbelt for the past three years.

WA Farmers Federation president Tony York wants the WA government to scrap stamp duty on farm insurance products.

"I do find it confusing, because it seems to be a lot easier for farmers to invest in life insurance or motor vehicle insurance, or fire and hail insurance, and really you're doing the same thing with multi-peril crop insurance," he said.

"Other insurance products have evolved to the point where they're loosely one or two per cent of your income that you pay up front as a premium.

"MPCI is probably more around the five or 10 per cent mark, so there's a reluctance to be prepared to forgo that income to minimise your losses."

Low uptake

Increasing the adoption of coverage was a major plank of the 2015 Agriculture White Paper, released by former agriculture minister Barnaby Joyce, which included the $29 million Managing Farm Risk Program.

Since July 2015, farmers can be rebated up to $2,500 for the cost of investigating their insurance options and seeking quotes, but by the end of June this year just 69 farmers had successfully participated, according to figures from the Department of Agriculture.

The majority of rebates were for eligible activities related to multi-peril products, but the program's funding had been reduced to reflect the low demand, a department spokesman said.

One provider of MPCI, AgriRisk's managing director John van der Vegt described the program as "unsuccessful".

"That's partly because the program itself hasn't gained traction with growers, the eligibility criteria was a limiting factor, and the process required to secure the rebate was complicated," he said.

MPCI is common in many developed and developing countries, but Australia remains an outlier, according to a report from agri-think tank the Australian Farm Institute (AFI) due for release in early December.

"The premium costs are prohibitive to many producers due to the existing market's small size, and the premium costs therefore create a barrier to uptake, meaning the market remains small and premiums remain high."

Mr York had used the products for the past three seasons.

"This is really transferring the risk from the public sector to the commercial insurance industry," he said.

"Farming is much more risky these days, and this about making farmers more aware of their options for risk management."

National and state farming groups say it's a risky business, and the Government needs to explore tax breaks for insurance policies.

Insurance companies want farm income protection taken up by a range of producers to mitigate against natural disasters.

ABC Rural: Danielle Grindlay

Further steps

Mr Trotter said that, with a strong tax incentive in place to increase adoption of MPCI among grain growers, the products would eventually be available to all farmers.

"This is why it's called 'farm income protection'," he said.

"We want to migrate this out to the strawberry growers, livestock producers, the sugar growers in the path of cyclones, what makes this work is having a large diversity in the type of farmers in the program."

But the global reinsurance industry responsible for underwriting the policies would be unable to support the expansion without the Australian Government first adopting the use of 'catastrophe bonds'.

First created after Hurricane Andrew hit Florida in 1992, the bonds were issued by insurance companies who used the investment to alleviate the risk and financial pressure of paying multiple policies when disasters hit.

"At the moment we only have grain producers, and this is why we need the help of the Government to put a catastrophic bond behind the concept, so we then have the time to grow into new sectors," Mr Trotter said.

"It would mean the entire program would be self-sufficient in the five to seven-year window from now."

Even before cases of strawberry sabotage crippled sales and cost the industry millions of dollars, Australian growers were despairing over dumping tonnes of perfectly good fruit that was too small or odd-shaped to find a market.